The effects of a daycare reform on health in childhood – Evidence from Sweden

This paper studies the impact of a daycare reform on children’s mental and physical health development in Sweden. The reform effectively reduced daycare fees by a significant amount and went along with an expansion of supply. We draw on a unique set of comprehensive individual-level healthcare register data over the period 1999–2008. By exploiting variation in reform exposure by birth cohort, we estimate short and medium-run effects on child health at different ages. We find a significant reduction in mental disorders in the medium-run for children affected by the reform. The reform leads to strong and immediate increases in probabilities of diagnosis with physical health conditions that fade out as children get older. Sub-sample analyses indicate that the reform effects are strongly associated with children from disadvantaged backgrounds. An analysis of healthcare utilization shows that affected children have more overall medical visits at younger ages but fewer sickness-related visits in primary school than non-affected children.